- The portion of buy orders edged up from 48 to 56%
- 72% of traders hold long positions
- The weekly R3 at 109.83 represents immediate resistance
- Support is around 108.60
- 56% of the survey participants expect the US Dollar to cost more than 114 yen in three months
- Upcoming events: US Crude Oil Inventories,, US Federal Budget Balance, Japanese Current Account
The Buck experienced mixed performance on Tuesday, having appreciated against some major peers, but also declined against the others. The USD/JPY gained the most, having surged 0.88%, followed by a 0.49% rally of the USD/CHF. At the same time, the Greenback added only 0.16% against the Kiwi, while remaining relatively unchanged against the Euro, edging only 0.08% higher. Against the remaining commodity currencies the American Dollar lost 0.65% and 0.40%, namely versus the Aussie and the Loonie, respectively; meanwhile, the Cable also slid 0.26%.
American employers posted the most open jobs in eight months in March, but total hiring slowed, sending mixed signals of the labour market. Job openings rose 2.7% to 5.76 million, the most since July, the Labor Department reported. That may suggest better hiring in the coming months. Yet hiring slowed to 5.3 million from 5.5 million. That indicates employers became more reluctant to fill open positions, due to slower economic growth from October through March. The decline in hiring echoes a pullback that was reported last week, when the official data showed net hiring slowed in April. Yet the increase in job openings suggests that job gains could pick up again in the coming months. Last week's non-farm payrolls report showed the world's biggest economy created the fewest number of jobs in seven months and Americans dropped out of the labour force, casting doubts on whether the Fed will hike interest rates before the end of the year. According to the Labor Department, non-farm payrolls rose by 160,000 jobs last month as construction employment barely climb and the retail sector shed jobs. That was the smallest gain since September and below the first-quarter average job growth of 200,000.
Moreover, employers appeared to add 19,000 fewer jobs in February and March than previously estimated. While the unemployment remained unchanged at 5.0% it came at cost of people dropping out of the labour force. The share of Americans participating in the labour force dropped to 62.8% in April from 63.0% in March.
Vatsal Srivastava, director at the Blackwater Consulting, explains why the US Dollar is a advancing against the Yen this week. Even though he says that there was nothing fundamentally driving USD/JPY on Monday, one of the key drivers is the falling oil prices, which is actually boosting the Yen, in his opinion, as there is an addition cause for more QQE. Vatsal Srivastava also mentions that "it is going to be a hard economic ride ahead and there seems to be no light on the horizon for Japan as of now". "Lets hope for the best," he added.
US Federal Budget Balance and Japanese Current Account
Among the events to influence the USD/JPY pair today the US Federal Budget Balance is due. It summarizes the financial activities of federal entities, disbursing officers, and Federal Reserve banks. A positive budget statement that receipts exceed budgetary outlays is seen as bullish for the USD. On the other hand, a negative figure (deficit) that indicates government debt is seen as bearish. Furthermore, early tomorrow the Japanese Current Account is to be released by the Ministry of Finance. It is a net flow of current transactions, including goods, services and interest payments into and out of Japan. A current account surplus indicates that flow of capital into Japan exceeds the capital reduction. A current account deficit indicates that there is a net capital outflow from these sources.USD/JPY under the risk of falling back under 109.00
On Tuesday the US Dollar edged higher against the Yen, prolonging its bullish momentum after a sharp 500-pip slump two weeks ago. Since then the pair managed to negate slightly more than a half of those losses, having retaken the 109.00 mark yesterday. The Yen's safe-haven status appears to be prevailing today, thus, pushing the USD/JPY currency pair to the downside. The pair faces a tough support area around 108.60, represented by the 20-day SMA, the weekly R2 and the monthly PP. As a result, this support could prompt the Greenback to continue moving higher, in which case the weekly R3 at 109.83 will be the first target.Daily chart
The Greenback managed to retake the 109.00 level on Tuesday, but momentum began fading after the pair reached a nine-day high of 109.40. The main target now is the 200-hour SMA around 107.30, which could provide support for another bullish development.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 61% of open positions are long, eight percentage points less from Tuesday. Meanwhile, the sentiment as reported by SAXO Bank remains bullish at 55%, compared to 57% yesterday.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to rise above 114 yen
More than half of the surveyed (56%) now assumes that the US Dollar is to cost more than 114.00 yen after three month time. The most popular choice implies that the Greenback is to cost somewhere between 114.00 and 115.50 yen in three months, selected by more than a quarter (34%) of the voters. According to the votes collected between April 11 and May 11, the mean forecast for August 11 is 111.78. At the same time, 19% of the surveyed believe the Greenback could cost between 115.50 and 117.00 yen in three months.
Compared to the previous week the bullish sentiment gained even more strength, as two thirds of all votes are now set to acquire the American currency versus the Yen. As a result, the average forecast for the pair for the end of this week went up to 107.
Megajorko believes that the USD/JPY could end the week higher. He commented that "After the strong drop in the pair there will surely be a correction. A little information is still given about future Japanese stimulus program and if there are new rumors of returning to bond purchase I think the pair will go again up."
Meanwhile, Jognesh is bearish on the USD/JPY, suggesting that the equity market continues it's bearish cycle globally. "During down trends in equities, we tend to see stronger correlations with JPY which is what we have seen as of late. As well, the BOJ has not given the market much of a reason to continue selling the JPY, and so we can see the pair continue to drift lower," he shared his opinion.